Another Rs 1,777 cr to flow out of turn around plan for Air India this year

By: | Published: May 2, 2015 12:13 AM

Air India will now receive a bigger amount as a parliamentary committee has recommended to the government that it should make an additional equity infusion of Rs 1,777 crore.

National carrier Air India, whose FY16 budgetary allocation had been cut, will now receive a bigger amount as a parliamentary committee has recommended to the government that it should make an additional equity infusion of Rs 1,777 crore.

The Department Related Parliamentary Standing Committee on Transport, Tourism and Culture had, in an April 28 report, said it hoped for additional funds into Air India in the form of equity infusion as per the turn around plan (TAP).

“The committee recommends that since Air India is already on the path of recovery and preforming well, the government should provide Rs 1,777 crore which stands as a deficit in equity infusion without any cut during the course of the current financial year,” the report said.

According to senior Air India officials, the government is expected to approve this additional infusion during the monsoon session and the airline hopes to receive the amount by August-September.

“The Rs 1,777 crore will be used by the airline to pay off a part of government-garunteed loans, while the remaining will be used to service the interest rates on such loans,” a senior airline official told FE.

The airline’s net debt, including aircraft and working capital loans, stood at about Rs 40,000 crore at the end of December 31.

Air India had asked the finance ministry for Rs 4,277 crore in 2015-16 to repay debt, strengthen operations and hire staff, as it strives to return to profitability by 2018-19.

While the government had budgeted Rs 6,500 crore for the carrier in FY15 and Rs 6,000 crore in FY14, it allocated only Rs 2,500 crore to the airline during FY16. The decision to cut down allocation by more than a half came despite the government not releasing about Rs 720 crore out of Rs 6,500 crore announced for FY15 due to fiscal constraints.

“The main focus for FY16 is to improve on our on-time performance (OTP) and return to profitability. If we can improve on our current performance, we can hope to report profit from 2018-19. From this aspect the government infusion is extremely important for us,” the senior Air India official added.

The national carrier expects an operating profit of about Rs 10 crore during FY16, its first annual operating profit since the implementation of the government-approved TAP in 2012. It hopes to achieve a 77.7% passenger load factor (PLF) on domestic routes and a 73 PLF on international routes during the period.

During the first nine months of Fy15, Air India’s total revenues stood at Rs 16,000 crore while its operating expenses were Rs 16,700 crore. The airline posted an operating loss of Rs 1,700 crore and a net loss of Rs 3,600 crore during the period. According to the airline’s budget estimates for FY15, it is expected to post a net loss of Rs 4,346 crore on total revenue of Rs 21,290 crore and operating expenses of Rs 22,525 crore.

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